Loonie Slumps as Trump Threatens Tariffs on Canadian Autos

The Canadian dollar has taken a hit due to escalating trade tensions between Canada and the United States. The loonie weakened by about 0.6% against the US dollar after President Donald Trump threatened higher tariffs on Canadian automobiles, car parts, and steel. This move is in response to the collapse of US-Canada trade negotiations and the introduction of new US tariffs on Canadian goods.

The US President stated that Canada will be treated like a state no longer, adding pressure on Ottawa. In response, Canada has pledged to match Washington's measures dollar for dollar with retaliatory levies targeting US steel, dairy, appliances, agricultural equipment, pulp and paper, and electronics scheduled to take effect September 8.

Analysts note that the daily RSI on USD/CAD had entered oversold territory for the first time since January before Monday's bounce, suggesting a technical short squeeze rather than a fundamental re-rating of the pair. Canadian exporters are now subject to new levies, and companies with significant Canada-US cross-border supply chains face increased costs and demand risk.